Capital Gains Exemption just got Complicated
**Most of us are familiar with the capital gains exemption on the sale of a primary residence. Basically, if you sell your home and you have lived in it for two of the last five years, you would not owe any tax on the gain or profit from the sale.
Many people have relied on this tax law when planning to buy or sell rental property and deciding how to sell multiple rental properties when it comes to retirement planning.
The laws have changed as of the first 2009 and some of the methods used in the past to legally avoid paying capital gains have been greatly effected.
In the old way of doing things, someone could buy a property, put tenants in it as a rental for any length of time, move the renters out later in the future and move in themselves for two years and sell it with no capital gains whatsoever.
As of 2009, any property purchased after January 1st that is not lived in for two years as a primary residence first, prior to being used as a rental or income property, will be subject to capital gains on the sale even if the owner moves in for two years later on, though the IRS is allowing you to pro-rate the gains against the number of years you do live in it. So if you buy a property today and it is used as a rental for say two years, then you move into it for two years and sell, you will owe capital gains on fifty percent of the profits from the sale.
The IRS still allows you to buy a property, live in it for two plus years, then rent it out and if you sell in the next three years, you will not owe any capital gains, so the purpose that this program was originally designed for is basically still there.
The difference is in how you plan around taking advantage of this tax shelter for it to work right for you.
I would love to help you with your real estate investments.
Ivan Crago Realtor Missoula, Mt.
Associated with Prudential Missoula Properties
Cell 406-531-6396 Fax 406-728-2315 Office 406-728-8270
Missoula, Mt Looking North from The Ranch Club Golf Course